Market Update for the week of October 16, 2017 – Vol. 15, Issue 41

QUOTATION OF THE WEEK…”Knowledge born from actual experience is the answer to why one profits; lack of it is the reason one loses.” –Gerald M. Loeb, stock trader, author and a founding partner of EF Hutton

INFO THAT HITS US WHERE WE LIVE… Fannie Mae’s Home Purchase Sentiment Index (HPSI) for September reports that renters are suddenly saying now is a good time to buy a home. This is a substantial increase in optimism from August when more Americans felt it was the right time to sell a home, but not buy one. The overall HPSI matched its June all-time high, after posting the highest monthly increase in the share of those who say it’s a good time to buy. And Americans are still saying now is a good time to sell, with that component of the HPSI 23% ahead of last year’s reading, and only 1% lower than the survey’s all-time high.
Ellie Mae, a provider of loan origination software and services, released its latest Millennial Tracker, which shows continued housing demand in this key segment. Their executive vp acknowledged today’s market challenges, but observed, “for those who are committed to buying a home…slight increases in competition, costs or interest rates will likely not deter them.” The report also noted that Millennials are moving away from larger metros in what may be a growing trend. An online real estate database reports 42% of all home buyers are first-timers and 28% of renters lease single-family homes, making them prime prospects for home buying.
BUSINESS TIP OF THE WEEK… When you’re in the midst of a challenge with a client or colleague, think win-win. Interact and collaborate. Figure out how to create a win-win scenario for all parties.

>> Review of Last Week
NOT MUCH TO COMPLAIN ABOUT… Stocks went higher in the first week of the third quarter earnings season, as Wall Streeters couldn’t find much to criticize in today’s economic environment. Of the companies reporting earnings, 81% delivered better-than-expected results. Add to this a spate of surprisingly good economic reports, and we saw all three major market indexes head up for the week. The Dow and the S&P 500 are now up for five straight weeks and the Nasdaq for three, closing at a record high for the 57th time this year. So far in 2017, the Dow is up 15.7%, the S&P 500 has advanced 14.0% and the Nasdaq is ahead 22.7%.
Unexpectedly good economic data featured Retail Sales blasting up 1.6% in September, its biggest monthly bump in two and a half years. And that happened even with Hurricanes Harvey and Irma slamming a good bit of consumer spending. Some economists expect sales to stay above trend in the months ahead due to pent-up demand from the hurricanes and the need to replace what was lost. Preliminary University of Michigan Consumer Sentiment for October shot up to 101.1, its highest reading in 13 years, with positive sentiment occurring in all age and income groups. Inflation came in soft, the core Consumer Price Index up just 0.1%.
The week ended with the Dow UP 0.4%, to 22872; the S&P 500 UP 0.2%, to 2553; and the Nasdaq UP 0.2%, to 6606.
Bond traders took Monday off, but four days was enough time to push Treasury prices up after a four-week losing streak. Tame inflation, something bonds love to see, certainly helped. The 30YR FNMA 4.0% bond we watch finished the week UP .12, to $105.25. Nonetheless, national average 30-year fixed mortgage rates increased for the second week in a row in Freddie Mac’s Primary Mortgage Market Survey for the week ending October 12. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… It’s reported that only 18% of sellers found their listing agent on a website, app, search engine, social media or other online source. 61% learned of their agent through referrals and face-to-face experiences.

>> This Week’s Forecast
HOME BUILDING, EXISTING HOME SALES, MID-ATLANTIC MANUFACTURING DIP A BIT… Given the hurricane clean-up going on in Houston and the hurricane damage happening in Florida in September, both Housing Starts and Building Permits are expected to be down, though not by that much. With sub-par performances out of the nation’s fourth largest city and third largest state, Existing Home Sales are also predicted to slip, but not by a lot. The Philadelphia Fed Index should show Mid-Atlantic manufacturing still growing nicely, just at a slightly slower pace.

>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Oct 16 – Oct 20
Date Time (ET) Release For Consensus Prior Impact
M
Oct 16 08:30 NY Empire Manufacturing Index Oct 21 24.4 Moderate
Tu
Oct 17 09:15 Industrial Production Sep 0.2% -0.9% Moderate
Tu
Oct 17 09:15 Capacity Utilization Sep 76.1% 76.1% Moderate
W
Oct 18 08:30 Housing Starts Sep 1.160M 1.180M Moderate
W
Oct 18 08:30 Building Permits Sep 1.225M 1.300M Moderate
W
Oct 18 10:30 Crude Inventories 10/14 NA -2.8M Moderate
W
Oct 18 14:00 Fed’s Beige Book Oct NA NA Moderate
Th
Oct 19 08:30 Initial Unemployment Claims 10/14 236K 243K Moderate
Th
Oct 19 08:30 Continuing Unemployment Claims 10/07 NA 1.889M Moderate
Th
Oct 19 08:30 Philadelphia Fed Index Oct 20 23.8 HIGH
Th
Oct 19 10:00 Leading Economic Index (LEI) Sep 0.1% 0.4% Moderate
F
Oct 20 10:00 Existing Home Sales Sep 5.29M 5.35M Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… Comments from Fed members have the financial market firmly expecting a rate hike in December, but no further move up in January. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.
Current Fed Funds Rate: 1.00%-1.25%
After FOMC meeting on: Consensus
Nov 1 1.00%-1.25%
Dec 13 1.25%-1.50%
Jan 31 1.25%-1.50%

Probability of change from current policy:
After FOMC meeting on: Consensus
Nov 1 2%
Dec 13 88%
Jan 31 89%


Market Update for the week of October 9, 2017 – Vol. 15, Issue 40

QUOTATION OF THE WEEK…”The only person wise about the future is the person who keeps silent.” –John Kenneth Galbraith, Canadian-born American economist, public official and diplomat

INFO THAT HITS US WHERE WE LIVE… Home prices continued to rise in August, up 0.9% from July, in the latest Home Price Index and HPI Forecast from CoreLogic, a global information and analytics firm. Prices are up 6.9% from the year before, but are forecast to rise only 4.7% by August next year. Lack of inventory has stalled sales in many markets, but according to CoreLogic’s chief economist, “the tight inventory has actually helped stabilize price growth.” The First American Real House Price Index (RHPI) reported that “while affordability is lower than a year ago, it remains high by historic standards.” The RHPI is 38.4% below its housing boom peak of July 2006.
The RHPI adjusts for the impact of income and interest rate changes on consumer house-buying power. One property database noted “Falling interest rates in the third quarter provided enough of a cushion to counteract rising home prices in most U.S. markets.” Further helping affordability, the firm reported that “wage growth is outpacing home price growth in about half of all local markets so far this year.” We’re even seeing Millennials becoming a bigger factor in housing demand. A study by a national real estate site says Millennials put about $514 billion into the U.S. housing market in the past year, becoming the largest generation of home buyers.

BUSINESS TIP OF THE WEEK… Once a month, take time to evaluate what is and isn’t working in your business. Going forward, put 90% of your time against the top 50% of your revenue producing activities.

>> Review of Last Week
JOBS DOWN, WAGES AND STOCKS UP… The September jobs report showed Nonfarm Payrolls shrank by 33,000, but wages were up a solid 0.5%, so stocks went in the same direction. All three major market indexes scored weekly gains. Wages grew 2.9% year-over-year, the highest level since the financial crisis and a welcome increase over the 2.6% average wage gain of the past two years. Higher wages boost personal spending, the largest contributor to growth. The payroll decline was blamed on hurricanes Harvey and Irma, since workers in the affected areas couldn’t get to jobs. For example, restaurant and bar payrolls fell by 105,000, versus 20,000 gains in prior months.
In any case, payroll gains are averaging 148,000 a month this year, as 1.3 million jobs have been added the last nine months. The unemployment rate fell to 4.2%, a 16-year low, even though there are more workers, with the labor force participation rate now at 63.1%. The U-6 unemployment rate, which includes part-timers who would prefer full-time work and workers not actively looking, dropped to 8.3%, its lowest level since 2007. In addition, the ISM manufacturing index shot up to 60.8 in September, its highest level since 2004. And the ISM services index grew to a 59.8 read, its fastest pace since 2005. Finally, the August trade deficit was a lower-than-expected $42.4 billion.
The week ended with the Dow UP 1.6%, to 22774; the S&P 500 UP 1.2%, to 2549; and the Nasdaq UP 1.5%, to 6590.
The week saw modest losses in the bond market, as the wage growth spike in the jobs report firmed up expectations for a December rate hike. The 30YR FNMA 4.0% bond we watch finished the week down .09, to $105.13. Freddie Mac’s Primary Mortgage Market Survey for the week ending October 5 reported national average 30-year fixed mortgage rates went up a tick after holding steady the week before. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Experts say living in a home more than seven years could lower home buyers’ exposure to market fluctuations. But among Millennials, only 37% plan to live in their next home more than six years.

>> This Week’s Forecast
RETAIL REBOUNDS, INFLATION MILD… After its negative dip in August, Retail Sales should bounce back into positive territory for September. Inflation doesn’t seem to be firing up to what the Fed wants to see for a rate hike. The Consumer Price Index (CPI) is forecast to edge up just a little, and Core CPI, which excludes volatile food and energy prices, is expected to stay at the same low level.
Today, in observance of Columbus Day, the U.S. Treasury market is closed but the stock market is open.

>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Oct 9 – Oct 13
Date Time (ET) Release For Consensus Prior Impact
W
Oct 11 10:30 Crude Inventories 10/07 NA -6.0M Moderate
Th
Oct 12 08:30 Initial Unemployment Claims 10/07 255K 260K Moderate
Th
Oct 12 08:30 Continuing Unemployment Claims 09/30 NA 1.938M Moderate
Th
Oct 12 08:30 Producer Price Index (PPI) Sep 0.4% 0.2% Moderate
Th
Oct 12 08:30 Core PPI Sep 0.2% 0.1% Moderate
Th
Oct 12 14:00 Federal Budget Sep NA $33.4B Moderate
F
Oct 13 08:30 Retail Sales Sep 1.5% -0.2% HIGH
F
Oct 13 08:30 Retail Sales ex-auto Sep 0.8% 0.2% HIGH
F
Oct 13 08:30 Consumer Price Index (CPI) Sep 0.6% 0.4% HIGH
F
Oct 13 08:30 Core CPI Sep 0.2% 0.2% HIGH
F
Oct 13 10:00 U. of Michigan Consumer Sentiment – Prelim. Oct 95.6 95.1 Moderate
F
Oct 13 10:00 Business Inventories Aug % 0.2% Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months…Wall Street feels a quarter percent rate hike in December is pretty much a certainty, but that should be it for a while. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.
Current Fed Funds Rate: 1.00%-1.25%
After FOMC meeting on: Consensus
Nov 1 1.00%-1.25%
Dec 13 1.25%-1.50%
Jan 31 1.25%-1.50%

Probability of change from current policy:
After FOMC meeting on: Consensus
Nov 1 2%
Dec 13 91%
Jan 31 91%


Market Update for the week of October 2, 2017 – Vol. 15, Issue 39

QUOTATION OF THE WEEK…”Always listen to experts. They’ll tell you what can’t be done, and why. Then do it!.” –Robert A. Heinlein, American science fiction writer

INFO THAT HITS US WHERE WE LIVE… Hurricane damage continues to appear in the housing market, the latest example being last week’s report that New Home Sales dropped 3.4% in August to a 560,000 unit annual rate. This monthly glitch sent sales 1.2% below where they were a year ago. But new home sales are counted at contract signing, not closing, and it’s likely Hurricane Harvey delayed many buyers ready to sign in August. It’s expected Hurricane Irma will have a similar effect on September’s New Home Sales numbers. The Census Bureau tells us the areas hit by the storms accounted for 14% of single-family homes authorized in 2016.
August’s Pending Home Sales measure of contract signings on existing homes, showed similar storm damage, slipping 2.6%. This points to a September sales skid, although analysts expect a Q4 rebound. And hey, consumer sentiment is rising. A National Association of Realtors survey reports: the share of homeowners who say now is a good time to sell hit 80%, a new high; the share of renters who think now is a good time to buy went from 52% in Q2 to 62% in Q3; and the share of households who feel the economy is improving grew to 57%, from 48% a year ago. The chief economist noted, “the typical household looks as [financially] healthy as it’s been since the recession.”

BUSINESS TIP OF THE WEEK… Studies show people prefer doing business with people they like, and what they like most from people in business is authenticity and honesty.

>> Review of Last Week
LOWER TAXES, HIGHER STOCKS… The long-awaited tax reform announcement from President Trump’s administration contained the anticipated features of significantly lower taxes for corporations and the middle class. The proposal promises to grow businesses and jobs, especially small businesses that support the majority of our payrolls, and to boost consumer spending which drives 70% of our economy. Wall Street felt this bodes well for faster economic growth, so stocks went higher. The three major indexes scored weekly, monthly and quarterly gains, with the S&P 500 hitting its 39th record high this year, and the Nasdaq posting its 50th new benchmark.
Even though lower taxes are not yet the law of the land, the economy steadily improves. The final GDP read showed economic growth in Q2 “exploded,” as one report put it, to a 3.1% annual rate. O.K.! We also had the Chicago PMI showing Midwest manufacturing surged in September, while the Philadelphia Fed index reported a similar boost in manufacturing activity in that region. Durable Goods Orders rose 1.7% in August. Personal Income and Personal Spending also improved. But the Fed’s favorite measure of inflation, Core PCE Prices, went up only 0.1% in August, and is up just 1.3% the past year, a long way from the central bankers’ 2% inflation target.
The week ended with the Dow UP 0.2%, to 22405; the S&P 500 UP 0.7%, to 2519; and the Nasdaq UP 1.1%, to 6496.
It was a down week again in the bond market as Fed Chair Janet Yellen gave a speech Tuesday that bolstered expectations for a December rate hike. The 30YR FNMA 4.0% bond we watch finished the week down .09, at $105.22. National average 30-year fixed mortgage rates were unchanged from the week before in Freddie Mac’s Primary Mortgage Market Survey for the week ending September 28. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Since its inception, the University of Michigan Consumer Sentiment average reading is 85.4, during recessions, 69.3. It was 95.1 this September.
>> This Week’s Forecast

MANUFACTURING, SERVICES GROW, IRMA BLOWS DOWN NONFARM PAYROLLS… Monday we get the ISM Index of manufacturing activity for September. That sector continues to strengthen, with the read predicted to stay well north of 50, indicating solid expansion. The services sector, which generates most of our jobs, should also look good, with the ISM Services Index forecast well above 50. Friday’s September Employment Report is expected to deliver a smaller Nonfarm Payrolls number, thanks to Irma’s impact on the major Florida market. But Hourly Earnings should keep creeping up.

>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Oct 2 – Oct 6
Date Time (ET) Release For Consensus Prior Impact
M
Oct 2 10:00 ISM Index Sep 57.8 58.8 HIGH
W
Oct 4 10:00 ISM Services Index Sep 55.3 55.3 Moderate
W
Oct 4 10:30 Crude Inventories 09/30 NA -1.8M Moderate
Th
Oct 5 08:30 Initial Unemployment Claims 09/30 265K 272K Moderate
Th
Oct 5 08:30 Continuing Unemployment Claims 09/23 NA 1.934M Moderate
Th
Oct 5 08:30 Trade Balance Aug -$42.6B -$43.7B Moderate
F
Oct 6 08:30 Average Workweek Sep 34.3 34.4 HIGH
F
Oct 6 08:30 Hourly Earnings Sep 0.2% 0.1% HIGH
F
Oct 6 08:30 Nonfarm Payrolls Sep 75K 156K HIGH
F
Oct 6 08:30 Unemployment Rate Sep 4.4% 4.4% HIGH

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months…The Fed futures market is still looking for a quarter percent rate hike in December, but nothing more come January. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.
Current Fed Funds Rate: 1.00%-1.25%
After FOMC meeting on: Consensus
Nov 1 1.00%-1.25%
Dec 13 1.25%-1.50%
Jan 31 1.25%-1.50%

Probability of change from current policy:
After FOMC meeting on: Consensus
Nov 1 2%
Dec 13 78%
Jan 31 78%


Market Update – For the week of September 25, 2017 – Vol. 15, Issue 38

QUOTATION OF THE WEEK…”Do your work with your whole heart, and you will succeed–there is so little competition.” –Elbert Hubbard, American writer

INFO THAT HITS US WHERE WE LIVE… As expected, the ill winds of the recent hurricanes blew no good in the housing market. August Housing Starts slipped 0.8%, to a 1.180 million annual rate, but with Hurricane Harvey hitting our fourth largest city late that month, this small dip shouldn’t be a concern. Analysts say Hurricane Irma, which impacted our third most populous state, may also deflate September numbers. Of course, rebuilding after the storms and solid market fundamentals are expected to send starts to new highs by early next year. They’re still up 1.4% from a year ago, with single family starts up 1.6% for the month.
Building permits fared better, up 5.7% in August, to a 1.3 million annual rate. This shows a positive vibe, although the National Association of Home Builders sentiment index dipped in September, a typical reaction after big storms, coming in at a still high 64. August Existing Home Sales dropped 1.7%, to a 5.35 million annual rate, with Harvey also to blame, sales in the Houston area down 25% versus a year ago. Experts say we may not get back to normal selling rates until December. Freddie Mac’s latest monthly Outlook sees sales growing next year, as “the economic environment remains favorable for housing and mortgage markets.” All right!

BUSINESS TIP OF THE WEEK… Keep learning. Check into business blogs, articles and books, network locally, go to a major conference. You’ll hone your skills, acquire new ones and stay up with your field.

>> Review of Last Week
THE FED HOLDS, THE MARKET HOLDS… The Fed met last week and held the Fed Funds rate where it’s been, as expected. But Federal Open Market Committee (FOMC) members made it clear they would soon tighten monetary policy. This news gave investors pause, so after sending stocks to fresh record highs the first half of the week, they cooled things down and held the week’s market performance to modest gains in the Dow and S&P 500, and a minor slip for the Nasdaq. The Fed indicated it would tighten policy in three ways. First off, 12 of the 16 voting FOMC members think they will hike rates at least a quarter point later this year.
Secondly, the Fed’s so-called “dot plot” remains unchanged from June, which scoped out three rate hikes in 2018, following the one now expected in December. Thirdly, before any of these rate hikes occur, the Fed will begin “normalizing” its balance sheet next month. To boost the economy, in addition to cutting rates, the Fed bought Treasuries and mortgage bonds to add liquidity (more money) to the system. This took its balance sheet from under $1 trillion to around $4.5 trillion. They’ll now start selling those bonds, but at a very slow pace, as they don’t want to hurt growth. And, remember, these moves are a positive sign that the economy is finally expanding at a healthier rate.
The week ended with the Dow UP 0.4%, to 22350; the S&P 500 UP 0.1%, to 2502; and the Nasdaq down 0.3%, to 6427.
A down week in the bond market ended higher for some Treasuries, as North Korean threats inspired a safe haven play on Friday. But the 30YR FNMA 4.0% bond we watch finished the week down .05, to $105.31. In Freddie Mac’s Primary Mortgage Market Survey for the week ending September 21, national average 30-year fixed mortgage rates edged up slightly. Freddie’s chief economist said “this week’s uptick…ends a nearly two-month streak of declines.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… A new report says says the best time of year to buy a starter home is from October 1 to December 31, when inventories increase about 7%, leading to listing prices falling 3.1% to 4.8% lower than the rest of the year.

>> This Week’s Forecast
NEW HOME SALES UP, PENDING SALES OFF, INFLATION AND MANUFACTURING GROW… They’re forecasting August New Home Sales will move up, but Pending Home Sales will fall back. This measure of contracts signed on existing homes reflects the tight inventories that have constrained this part of the housing market. Core PCE Prices inflation is expected to edge up into the range the Fed likes for a rate hike, so let’s watch this carefully. The Chicago PMI should show Midwest manufacturing continues to grow.

>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Sep 25 – Sep 29
Date Time (ET) Release For Consensus Prior Impact
Tu
Sep 26 10:00 Consumer Confidence Sep 119.4 122.9 Moderate
Tu
Sep 26 10:00 New Home Sales Aug 577K 571K Moderate
W
Sep 27 08:30 Durable Goods Orders Aug 0.7% -6.8% Moderate
W
Sep 27 08:30 Durable Goods Orders – ex trans Aug 0.2% 0.5% Moderate
W
Sep 27 10:00 Pending Home Sales Aug -0.4% -0.8% Moderate
W
Sep 27 10:30 Crude Inventories 09/23 NA 4.6M Moderate
Th
Sep 28 08:30 Initial Unemployment Claims 09/23 275K 259K Moderate
Th
Sep 28 08:30 Continuing Unemployment Claims 09/16 NA 1.980M Moderate
Th
Sep 28 08:30 GDP – Third Estimate Q2 3.0% 3.0% Moderate
F
Sep 29 08:30 Personal Income Aug 0.2% 0.4% Moderate
F
Sep 29 08:30 Personal Spending Aug 0.1% 0.3% HIGH
F
Sep 29 08:30 Core PCE Prices Aug 0.2% 0.1% HIGH
F
Sep 29 09:45 Chicago PMI Sep 58.0 58.9 HIGH
F
Sep 29 10:00 U. of Michigan Consumer Sentiment – Final Sep 95.4 95.1 Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months…The financial market is taking the Fed at its word and expecting a quarter point rate hike come December. Note: In the lower chart, a 2% probability of change is a 98% certainty the rate will stay the same.
Current Fed Funds Rate: 1.0%-1.25%
After FOMC meeting on: Consensus
Nov 1 1.0%-1.25%
Dec 13 1.0%-1.25%
Jan 31 1.0%-1.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Nov 1 2%
Dec 13 73%
Jan 31 74%


Market Update for the week of September 18, 2017 – Vol. 15, Issue 37

QUOTATION OF THE WEEK…”It’s not the will to win that matters. Everyone has that. It’s the will to prepare to win that matters.”–Bear Bryant, American college football player and coach

INFO THAT HITS US WHERE WE LIVE… After its massive data breach, credit bureau Equifax faces investigations by the House, Senate, Consumer Financial Protection Bureau, Federal Trade Commission (FTC), New York Attorney General, and state of Massachusetts. Because of glitches on the Equifax consumer information site, the NYAG advised people to “call Equifax to see if their data was compromised.” The FTC suggests getting free credit reports at annualcreditreport.com, and if you suspect identity theft, visit IdentityTheft.gov. They also warn of scammers calling, pretending to be Equifax: “Don’t tell them anything. Equifax will not call you out of the blue.” See more on the FTC website.
Hurricanes Harvey and Irma hit just before the National Flood Insurance Program (NFIP) was set to expire. But President Trump has signed an extension that gives Congress until December 8 to come up with a long-term NFIP solution, and the bill also provides substantial relief to Hurricane Harvey victims (most had no flood insurance). Mortgage data provider Black Knight reports purchase lending hit a 10-year high in Q2, 16% ahead of last year. A property database reports, as of July 31 there are 14 million equity rich properties, where the total mortgage amount is 50% or less than the estimated market value. That’s a 1.6 million gain over last year.

BUSINESS TIP OF THE WEEK… Success is built on teamwork. Even if you’re solo, every client relationship creates a team, as does every professional relationship you establish to meet a client’s needs. Teamwork works!

>> Review of Last Week
SHAKING IT OFF… We’ve recently had two hurricanes, another North Korean missile fired over Japan and some disappointing economic data, but investors shook it all off and sent the Dow and S&P 500 to new all-time highs last week. It was the Dow’s biggest weekly gain since December and the S&P 500’s largest since January. The worst news for us was the hotter-than-expected inflation read, with the Consumer Price Index (CPI) up 0.4% in August and up 1.9% year-over-year. This dialed up expectations the Fed at this week’s meeting will start reducing the assets it bought to shore up the financial crisis, and then do a rate hike in December.
Retail Sales disappointed, down 0.2% in August, but one equity manager observed, “given the storms, it’s hard to read too much into it.” Hurricanes Harvey and Irma are tragedies with an impact that will be felt a long time, and our thoughts remain with all those affected. In addition, economists say the storms may disrupt GDP near term, but the rebuilding process and the healthy underpinnings of the overall economy point to continued improving growth. It may be a few months for demand to get back to normal, but people are upbeat. The latest University of Michigan Consumer Sentiment Index reports that consumers’ assessment of their financial situation is the best it’s been in more than a decade.
The week ended with the Dow UP 2.2%, to 22268; the S&P 500 UP 1.6%, to 2500; and the Nasdaq UP 1.4%, to 6448.
The bond market saw a safe haven sell off, despite the less-than-excellent economic data. The 30YR FNMA 4.0% bond we watch finished the week down .39, to $105.36. National average 30-year fixed mortgage rates held at their 2017 low in Freddie Mac’s Primary Mortgage Market Survey for the week ending September 14. But their chief economist cautioned, “mortgage rates could see an increase in next week’s survey.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.
DID YOU KNOW?… A personal finance website reports home flipping in 2016 hit its highest point since 2007, with investors turning the largest average gross profit since 2000—nearly $63,000 per flip.

>> This Week’s Forecast
EXISTING HOME SALES OFF, BUT HOME BUILDING UP, PHILLY FACTORIES HANG IN… Hampered by tight inventory in many markets, Existing Home Sales are forecast to slip a bit in August. But Housing Starts should be up for the month, though Building Permits for future work are expected to slide. The Philadelphia Fed Index is predicted to show manufacturing expanding in that important region, but at a slightly less robust rate.

>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Sep 18 – Sep 22
Date Time (ET) Release For Consensus Prior Impact
Tu
Sep 19 08:30 Housing Starts Aug 1.170M 1.155M Moderate
Tu
Sep 19 08:30 Building Permits Aug 1.212M 1.223M Moderate
W
Sep 20 10:00 Existing Home Sales Aug 5.42M 5.44M Moderate
W
Sep 20 10:30 Crude Inventories 09/16 NA 5.9M Moderate
W
Sep 20 14:00 FOMC Rate Decision Sep 1.0%-1.25% 1.0%-1.25% HIGH
Th
Sep 21 08:30 Initial Unemployment Claims 09/16 310K 284K Moderate
Th
Sep 21 08:30 Continuing Unemployment Claims 09/09 NA 1.94M Moderate
Th
Sep 21 08:30 Philadelphia Fed Index Sep 17.1 18.9 HIGH

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months…The futures market sees no rate hike at this week’s FOMC meeting. But hold on, they’re now forecasting a better-than-even chance the Fed will push up the rates by a quarter of a percent in December. Last week they thought late spring. Go figure. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 1.0%-1.25%
After FOMC meeting on: Consensus
Sep 20 1.0%-1.25%
Nov 1 1.0%-1.25%
Dec 13 1.0%-1.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Sep 20 1%
Nov 1 5%
Dec 13 58%


Market Update for the week of September 11, 2017 – Vol. 15, Issue 36

QUOTATION OF THE WEEK…”Do. Or do not. There is no try.”–Yoda, Star Wars character created by American filmmaker George Lucas

INFO THAT HITS US WHERE WE LIVE… Last Thursday, major credit bureau Equifax revealed it was the victim of a “cybersecurity incident” that could impact up to 143 million consumers. They claim the breach involved data on a U.S. website application and not their core credit reporting databases. The company said it will send direct mail notices to everyone whose data was breached and that consumers can also check at equifaxsecurity2017.com. Security experts advise people affected to freeze their accounts immediately at all three credit bureaus–Equifax, Experian and TransUnion–and sign up for fraud protection services such as LifeLock, EZShield and Identity Guard.

Thanks to rising home prices and tight supply in many markets, Fannie Mae’s latest Home Purchase Sentiment Index reported more respondents think now is a good time to sell than a good time to buy. But the share of those who said mortgage rates will go down went up to 45%! Low rates certainly are helping, as mortgage originations went up 37% in Q2, and the Mortgage Bankers Association reported purchase applications up 1% for the week ending September 1. Finally, the head of the Small Business Administration said that her agency is set to give out $3.3 billion in Hurricane Harvey disaster loans to uninsured homeowners and businesses. Excellent.

BUSINESS TIP OF THE WEEK… What makes you unique? Think about it. Ask others who’ve worked with you. When you determine what your special value is, focus on that to build your business.

>> Review of Last Week
LESS APPETITE FOR RISK… The health of the stock market depends on investor willingness to take on the greater risk involved. In the holiday-shortened week, Wall Street’s appetite for risk was trimmed by too many worries, from Hurricane Harvey to Hurricane Irma, to continued geopolitical concerns about North Korea. The result? The three major market indexes headed down for the week, though not by that much. The S&P 500 in fact ended just 0.8% below its all-time high, so this wasn’t considered a turnaround from the positive market sentiment we’ve seen since the election. What little economic news we had was pretty good anyway.
The President and House and Senate leaders engineered a budget agreement that offers an extension of the government’s funding and debt ceiling, as well as federal money for hurricane relief. The ISM Services index rose to 55.3 in August, well above the 50 level signaling expansion in the sector of the economy that provides the vast majority of our jobs. Even July’s Trade Balance came in at a smaller than expected $43.7 billion deficit. In the past year, exports are up 4.9%, almost matching the growth of imports, up 5.1%. And a deeper look into August employment data revealed 30,000 new construction jobs, a considerable and much-needed boost.
The week ended with the Dow down 0.9%, to 21798; the S&P 500 down 0.6%, to 2461; and the Nasdaq down 1.2%, to 6360.
Wall Street’s aversion to risk played nicely into the safe haven of bonds. The 30YR FNMA 4.0% bond we watch finished the week UP .20, to $105.75. Freddie Mac’s Primary Mortgage Market Survey for the week ending September 7 reported national average 30-year fixed mortgage rates fell to a new year-to-date low for the third week in a row. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… The number of discouraged workers–people who aren’t looking for work because they do not believe jobs are available for them–has dropped to just 448,000, down 128,000 from last year.

>> This Week’s Forecast
INFLATION, RETAIL SALES BOTH GROW… The forecast is for inflation to pick up a bit more, with the Consumer Price Index (CPI) and Core CPI both rising in August after falling in July. The Fed is looking for growth here, so we’ll watch this closely. Retail Sales are expected to continue expanding nicely, especially when you take out volatile monthly vehicle sales in the Retail Sales ex-auto reading.

>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Sep 11 – Sep 15
Date Time (ET) Release For Consensus Prior Impact
W
Sep 13 08:30 Producer Price Index Aug 0.3% -0.1% Moderate
W
Sep 13 08:30 Core PPI Aug 0.2% -0.1% Moderate
W
Sep 13 10:30 Crude Inventories 09/09 NA 4.6M Moderate
Th
Sep 14 08:30 Initial Unemployment Claims 09/09 310K 298K Moderate
Th
Sep 14 08:30 Continuing Unemployment Claims 09/02 NA 1.940M Moderate
Th
Sep 14 08:30 Consumer Price Index (CPI) Aug 0.3% 0.1% HIGH
Th
Sep 14 08:30 Core CPI Aug 0.2% 0.1% HIGH
F
Sep 15 08:30 Retail Sales Aug 0.1% 0.6% HIGH
F
Sep 15 08:30 Retail Sales ex-auto Aug 0.5% 0.5% HIGH
F
Sep 15 08:30 NY Empire Manufacturing Index Sep 20.0 25.2 Moderate
F
Sep 15 09:15 Industrial Production Aug 0.2% 0.2% Moderate
F
Sep 15 09:15 Capacity Utilization Aug 76.8% 76.7% Moderate
F
Sep 15 10:00 Business Inventories Jul 0.2% 0.5% Moderate
F
Sep 15 10:00 U. of Michigan Consumer Sentiment Sep 95.5 96.8 Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months…The financial market now expects the Fed to keep rates where they are well into 2018. We’ll see. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 1.0%-1.25%
After FOMC meeting on: Consensus
Sep 20 1.0%-1.25%
Nov 1 1.0%-1.25%
Dec 13 1.0%-1.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Sep 20 1%
Nov 1 3%
Dec 13 38%


Market Update – For the week of September 5, 2017 – Vol. 15, Issue 35

QUOTATION OF THE WEEK…”It is during our darkest moments that we must focus to see the light.”–Aristotle, ancient Greek philosopher and scientist

INFO THAT HITS US WHERE WE LIVE… Our thoughts remain with the people of Texas recovering from Hurricane Harvey’s dramatic devastation and tragic loss of life. Their acts of heroism have touched us all. Damage is estimated to be at least $35 billion, with much of it outside the Special Flood Hazard Areas identified by the Federal Emergency Management Agency (FEMA). This means only about 20% of affected homeowners are expected to have FEMA flood insurance. But the outpouring of help from across the country has been phenomenal. And relief is being offered to homeowners from Fannie Mae, Freddie Mac, FHA and mortgage servicers. Good stuff.

Pending Home Sales dipped just 0.8% in July, their fourth slip in five months. This National Association of Realtors (NAR) measure of contracts signed on existing homes is currently suffering from tight supply, not weak demand. The NAR chief economist explained, “The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.” He added, “the typical listing has gone under contract within a month since April.” Some say rising prices are diminishing affordability, but First American’s Real House Price Index reported increased affordability, thanks to “falling rates for 30-year, fixed-rate mortgages and modest wage gains.”

BUSINESS TIP OF THE WEEK… Never lose sight of where you’re headed. Start every project keeping in mind your overall goals–for your work, and life! Keep those goals in mind, fitting today’s to-do list into your long-term plans.

>> Review of Last Week
BACK TO BREAKING RECORDS… The stock market moved up again for another week, as investors felt good enough about our economic prospects to buy up some of the bargains created by the mid-August dip from previous record levels. Spurred on by decent economic data, investors pushed all three major stock indexes up for the week, with the tech-heavy Nasdaq reaching an new all-time high. The GDP-2nd Estimate for Q2 showed the economy growing at an unexpected 3.0%. And the ISM Manufacturing index came in with a strong 58.8 growth reading for July, its highest level in more than six years.
This good news could have made Wall Street, and us, fearful the Fed would go for another rate hike. But those fears were calmed when Core PCE Prices showed inflation decelerated in July to 1.4% annually, far below the Fed’s 2% target for boosting rates. August jobs data also helped, with 156,000 new Nonfarm Payrolls. This was seen by many as a “Goldilocks” report, strong enough to advance the economy but weak enough to check the Fed. Meanwhile, Consumer Confidence stays near its 16-year high, and Michigan Consumer Sentiment’s chief economist reports that index “has been higher during the first eight months of 2017 than in any year since 2000.”
The week ended with the Dow UP 0.8%, to 21988; the S&P 500 UP 1.4%, to 2477; and the Nasdaq UP 2.7%, to 6435.
Bond investors had a more negative take on August jobs than equity traders and pushed prices up. The 30YR FNMA 4.0% bond we watch finished the week UP .10, at $105.55. In Freddie Mac’s Primary Mortgage Market Survey for the week ending August 31, national average 30-year fixed mortgage rates fell again, to a new yearly low. But the chief economist cautioned: “recent releases of positive economic data could halt the downward trend.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Experts predict that by 2025, there will be 5.2 million more homeowners in the U.S. Not surprisingly, Millennials born in the 1980’s and 1990’s will dominate the market.
>> This Week’s Forecast

SERVICES SECTOR AND PRODUCTIVITY GROW, WE HEAR FED STORIES… With the services sector providing the majority of jobs in the U.S., it’s encouraging that the ISM Services index is forecast to to report even more growth. Worker productivity is key to the economy, so it’s also good that the Q2 Productivity – Revised reading is expected to edge up. The Fed’s Beige Book will give anecdotal evidence of economic conditions in Fed Districts across the country. Could be interesting.
U.S. financial markets were closed yesterday, September 4, in observance of Labor Day.

>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of Sep 4 – Sep 8
Date Time (ET) Release For Consensus Prior Impact
W
Sep 06 08:30 Trade Balance Jul -$44.6B -$43.6B Moderate
W
Sep 06 10:00 ISM Services Aug 55.2 53.9 Moderate
W
Sep 06 10:30 Crude Inventories 09/02 NA -5.4M Moderate
W
Sep 06 14:00 Fed’s Beige Book Mar NA NA Moderate
Th
Sep 07 08:30 Initial Unemployment Claims 09/02 239K 236K Moderate
Th
Sep 07 08:30 Continuing Unemployment Claims 08/26 NA 1.942M Moderate
Th
Sep 07 08:30 Productivity-Rev. Q2 1.2% 0.9% Moderate
Th
Sep 07 08:30 Unit Labor Costs-Rev. Q2 0.3% 0.6% Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months…The Fed futures market sees no rate increases, near term. The next hike is currently projected for June. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 1.0%-1.25%
After FOMC meeting on: Consensus
Sep 20 1.0%-1.25%
Nov 1 1.0%-1.25%
Dec 13 1.0%-1.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Sep 20 1%
Nov 1 5%
Dec 13 44%


Market Watch: For the week of August 28, 2017 – Vol. 15, Issue 34

QUOTATION OF THE WEEK… “We don’t need more strength or more ability or greater opportunity. What we need is to use what we have.” –Basil S. Walsh, Irish author

INFO THAT HITS US WHERE WE LIVE… Not an inspiring week for housing data, but things weren’t as bad as they first looked. Wednesday, New Home Sales came in down 9.4% in July, at a 571,000 annual rate. Yes, sales for the month weren’t strong, but the dip looked worse, measured against June’s upwardly revised annual selling pace. Plus, the 8.9% drop in sales from a year ago compares this July’s performance to July 2016, which ranked as that year’s largest monthly gain for new home sales. An executive of a firm that provides housing information added, “housing starts are currently outpacing closings, signaling a growing market.”

That same exec reported, “Job growth is the number one fundamental fuel of new home development,” noting that the recent increase in high quality, higher paying jobs, is moving more Americans closer to home ownership. Existing Home Sales in July fared better, off just 1.3%, to a 5.44 million annual rate, and 2.1% ahead of where they were a year ago. Demand stays strong–July was the fourth month in a row a typical listing sold in under 30 days. Realtor.com’s chief economist said, “continued buyer interest in the face of more than five years of price growth is a sign of strong demand, and bodes well for the health of the housing market.”

BUSINESS TIP OF THE WEEK… Searching for a social, video or blog topic? What are the things you never get tired of talking about? Pick one that might sound interesting to your audience, and go!
>> Review of Last Week
BULLS BOUNCE BACK… After the market slid two weeks in a row, stocks last week surged back solidly, the Dow, S&P 500 and Nasdaq all finishing with nice gains. Investors focused on the Fed’s Jackson Hole Symposium, where Chair Janet Yellen said any changes to financial regulations should be modest, and didn’t mention monetary policy. European Central Bank President Mario Draghi also spoke, pushing for open trade and output growth. These speeches gave Wall Streeters the impression rate hikes are a good way off. Also comforting, Treasury Secretary Steven Mnuchin reiterated the debt ceiling will be raised in time to keep the government functioning.

The positive investor mood has sparked strong market performance this year, with the three major indexes near record levels. Low interest rates have helped, as well as rising corporate earnings–see the ‘DID YOU KNOW,’ below. But, most important, the U.S. economy is improving, and about to deliver more growth. The Atlanta Fed’s “GDP Now” model projects the economy expanding in Q3 at a 3.8% annual rate. The labor market is healthier, with an average 184,000 new jobs a month, the 4.3% unemployment rate is at a 16-year low, and economists think tighter employment conditions will lead to stronger wage growth.

The week ended with the Dow UP 0.6%, to 21812; the S&P 500 UP 0.7%, to 2443; and the Nasdaq UP 0.8%, to 6266.

Bond traders loved that Fed Chair Yellen’s Jackson Hole speech didn’t mention any reduction in their bond buying program, which would send prices down and rates up. The 30YR FNMA 4.0% bond we watch finished the week UP .04, at $105.45. The national average 30-year fixed mortgage rate fell for the fourth week in a row in Freddie Mac’s Primary Mortgage Market Survey for the week ending August 24. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… With 455 of the 505 companies in the S&P 500 reporting, Q2 earnings are up more than 11% over last year. One economist said the threat of recession is “as low, basically, as it ever gets.”
>> This Week’s Forecast
PENDING HOME SALES, INFLATION OK, MANUFACTURING, JOBS UP, GDP NEARS 3%… Not a bad set of economic data is forecast. Pending Homes Sales should keep growing in July. The Fed’s favorite PCE Prices measure of inflation is expected up just 0.1%, a 1.2% annual rate, far below their 2% target for a rate hike. The Chicago PMI and ISM Index should keep showing solid expansion in manufacturing. Just under 200,000 Nonfarm Payrolls are projected to have been added in July, while Q2 GDP should climb closer to a 3% economic growth rate.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Aug 28 – Sep 1
Date Time (ET) Release For Consensus Prior Impact
Tu
Aug 29 10:00 Consumer Confidence Aug 120.3 121.1 Moderate
W
Aug 30 08:30 GDP – 2nd Estimate Q2 2.7% 2.6% Moderate
W
Aug 30 10:30 Crude Inventories 08/26 NA -3.3M Moderate
Th
Aug 31 08:30 Initial Unemployment Claims 08/26 236K 234K Moderate
Th
Aug 31 08:30 Continuing Unemployment Claims 08/19 NA 1.954M Moderate
Th
Aug 31 08:30 PCE Prices Jul 0.1% 0.0% HIGH
Th
Aug 31 08:30 Core PCE Prices Jul 0.1% 0.1% HIGH
Th
Aug 31 08:30 Personal Income Jul 0.3% 0.0% Moderate
Th
Aug 31 08:30 Personal Spending Jul 0.4% 0.1% HIGH
Th
Aug 31 09:45 Chicago PMI Aug 58.9 58.9 HIGH
Th
Aug 31 10:00 Pending Home Sales Jul 0.5% 1.5% Moderate
F
Sep 1 08:30 Average Hourly Earnings Aug 0.2%. 0.3% HIGH
F
Sep 1 08:30 Average Workweek Aug 34.5 34.5 HIGH
F
Sep 1 08:30 Nonfarm Payrolls Aug 183K 209K HIGH
F
Sep 1 08:30 Unemployment Rate Aug 4.3% 4.3% HIGH
F
Sep 1 10:00 ISM Index Aug 56.8 56.3 HIGH
F
Sep 1 10:00 U. of Michigan Consumer Sentiment – Final Aug 97.1 97.6 Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… The Fed Funds Futures market shows no chance of a rate hike through the end of this year–and into the spring. We’ll see. Note: In the lower chart, a 0% probability of change is a 100% certainty the rate will stay the same.
Current Fed Funds Rate: 1.0%-1.25%
After FOMC meeting on: Consensus
Sep 20 1.0%-1.25%
Nov 1 1.0%-1.25%
Dec 13 1.0%-1.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Sep 20 0%
Nov 1 8%
Dec 13 42%